Answer:
will be greater than the nominal interest rate.
Explanation:
Inflation can be defined as the persistent general rise in the price of goods and services in an economy at a specific period of time.
Generally, inflation usually causes the value of money to fall and as a result, it imposes more cost on an economy.
Deflation can be defined as a fall or decrease in the overall price level of goods and services in an economy, so that inflation becomes negative while causing an increase in the purchasing power of a currency. Thus, an economy experiences a deflation when its inflation rate becomes negative i.e falls below zero percent (0%).
Furthermore, if an economy experiences deflation, the real interest rate will be greater than the nominal interest rate due to a negative inflation.
Mathematically, deflation is given by the formula;
Real interest rate - Nominal interest rate = - Inflation
